China has been the most rapidly growing economy in the world over the past 25 years. This growth has fueled a remarkable increase in per capita income and a decline in the poverty rate from 64 percent at the beginning of reform to 10 percent in 2004.

At the same time, however, different kinds of disparities have increased. Income inequality has risen, propelled by the rural-urban income gap and by the growing disparity between highly educated urban professionals and the urban working class. There have also been increases in inequality of health and education outcomes.

Some rise in inequality was inevitable as China introduced a market system, but inequality may have been exacerbated rather than mitigated by a number of policy features. Restrictions on rural-urban migration have limited opportunities for the relatively poor rural population. The inability to sell or mortgage rural land has further reduced opportunities.

China has a uniquely decentralized fiscal system that has relied on local government to fund basic health and education. The result has been that poor villages could not afford to provide good services, and poor households could not afford the high private costs of basic public services. Ironically, the large trade surplus that China has built up in recent years is a further problem, in that it stimulates an urban industrial sector that no longer creates many jobs while restricting the government's ability to increase spending to improve services and address disparities.

The government's recent policy shift to encourage migration, fund education and health for poor areas and poor households, and rebalance the economy away from investment and exports toward domestic consumption and public services should help reduce social disparities.

Comments

The article seems to be an accurate summary of China's economy. However, the poverty line at $1 a day is absurd. China not only has a water problem, among other environmental problems, it also has a small amount of arable land that has been shrinking (link below).

AE,"the poverty line at $1 a day is absurd", the poverty maily exists in rural area of china, let's educate you what life is like if you have $1 a day in China.

1). you would have your own house ( the space is no less than 100 square meter), every peasent has his own house in china, i think it is not difficult for you to verify it if you have any interest to find truth.
2). you would have a piece of your own land which can easily maintain your basic life, china's land is owned by state but it can ensure everyone has his own land, this is reason why no large slums exist in cities because you can go back if you lost interest in city.
3). You can go to factory if you do not satisfy $1 a day, you can easily find new job in city to earn $300 a month because of currently labor shortage.your whole family will easily escape the so called the poverty line $1 a day because chinese family bonded tradition.

T Yang, I stated before Warren Buffett earns $1 a year and has $50 billion in wealth. So, he could be considered impoverished (although, his social security would lift him out of poverty). It doesn't seem possible anyone can live on $1 a day. However, if there are few stores, to spend money, then $1 a day may be sufficient. Obviously, there isn't mass starvation in China. So, living standards seem higher than the $1 a day suggests. The lack of property rights in China creates a misallocation of resources (e.g. destruction of high-yielding farmland in link above) China seems to have worse slums than developed countries (link below). In short, many of China's economic (or government) policies are suboptimal to a large extent.

AE, you link is CCP propaganda,china is a devoloping country, you can compare china's slums to developing coutries instead of developed countries,most buildings in the "villages inside cities" are high-rise building, you see more floors can earn more rental money because limited land source, no big difference between a "svillages inside cities" and mordern sector at least on their appearance, few foreigner for his first time to Beijing can tell where is 346"villages inside cities" in Beijing,why? "villages inside cities" has not seen such "slums" as those in some democratic foreign countries, in which residents build their homes with sheet iron and paper boxes.

60-year-old trash collector Yao Guozhong who can earn 500 yuan (62 US dollars) a month by collecting and selling garbage is his part time income, he is a farm he must have a piece of land, thus, he must have other land rental fee, at least a net income of 4000 yuan or more a year in his hometown east China's Anhui Province. by the way, he seems under-reporting his income, this is chinese tradition, we can not say he is lazing because he is too aged 60 year old.

Please avoid arrogant comments like "many of China's economic (or government) policies are suboptimal to a large extent", you are commenting a country who is doubling its economy by every four years (by USD measuring),China's police deserve respect, you can see that we have never failed to predit china's GDP umber, I will predict more..
Year 2007..... 3.25 trillion (overtake German)
Year 2008..... 3.90 trillion
Year 2009..... 4.70 trillion
Year 2010..... 5.60 trillion (overtake Japan)
Year 2011..... 6.60 trillion
Year 2025..... 20.00 trillion (Overtake USA)

TY: you are commenting a country who is doubling its economy by every four years (by USD measuring),China's police deserve respect, you can see that we have never failed to predit china's GDP umber, I will predict more..

Considering the low base, such predictions are easy to make.

China will see, like all countries have seen, that expanding in the first stages is exponentially easy and then gets very difficult in further stages. Besides, you predict gross GDP numbers and not per capita. It is in the latter that a real judgment can be made.

We can assume that you know well the Chinese countryside, from which the young and poor a pouring into the large cities to find jobs. Chinese rural poor still live in almost abject poverty.

China's economic policy has taken advantage of low wages to expand through export led growth. Just as Japan did in the post-war years. It is a strategy that works and China is to be congratulated for using it.

But, if you think this sort of strategy can persist forever, you are sadly wrong. China must develop, and very quickly, an economy that is more accentuated upon internal demand, not foreign demand for goods and services. It can do it, of that there is little doubt.

But, for the moment, it remains very much in its initial stages. More over, the higher the standard of living the more people aspire to freedom and democracy - the ability to chose their own destiny rather than accept that imposed.

That question remains unresolved and, yet, it simmers at the very lowest levels. Just look at the recent agitation sparked by mobile telephone texting in some communities. (I am referring to the recent demonstrations in Xiamen, Shanxi and Henan.) That public agitation is a sign of what? The contentment of your fellow citizens?

T Yang, I agree with Lafayette. At least the communists are optimistic, in spite of the damage. The article you cite states a new property law becomes effective in October. That's a step in the right direction. However, how much power will the state really give up? Also, nothing in the article suggests Yao is receiving rental income. Moreover, the article I cited is by Xinhua, which you recommended. Xinhau is controlled by the state and tends to cast the best light (link below). So, it seems, the slum problem has become so large or severe, that it cannot be avoided.

Lafayette, expanding in the first stages is exponentially easy for all countries.

Could you tell me how many poor countries were expanding exponentially easy after world war II? perhaps you are thinking four "asian little dragon" have represent all countries, China's economic devolopment is not by accident but with necessary as following facors;
a). Political stable, CCP is doing good on this.
b). Social equalization, China's caste system have been completely smashed by CCP's revolution, every chinese think that they are equal in this nation, a remoted countryside young can dream to become tomorrow's billionaires or president of the nation, most CCP leaders were originated from countryside (any doubt please referring to family background of Hu Jintao, Wen Jiabao, Chairman Mao, Deng Xiaoping...), many billionaires are yesterday's peasants who are more enterprising due to less restraining than urban resident.
c). Women's social equalization improved dramatically after CCP revolution, women are liberating into labor market and become powerful force for economic development.
d). Education improvement, China's literate rate is higher comparing many devoloping country, 98% children complete their compulsory education which provide qulified labour.
e). Land reform, everyone in rural area has his/her land.
f). Birth control.
g). PLA is powerful enough to safeguard china's sovereign and territory integrity against western democratic aggression...
f). democratic movement have completely defeated, democracy for a devoloping country is joking, democratic activists who intend to destory china's stability are abandoned by chinese people and escape to western countries, they have no influence any more, your links about recent demonstrations in Xiamen, Shanxi and Henan is irrelevant to democracy but anti-pollutin and anti-children labor..thus, china can then concentrate itself on economic devolopment, give CCP 20 years more, you can see what china is going to be.

"nothing in the article suggests Yao is receiving rental income", it is from my own personal experience, I have been working in factory more than 10 years and never returned to my hometown since Year1999, but my land located in Guizhou (the poorest province in China) is still kept and is still receiving Rmb3000 a year for rental income, does my experince cheating me? Anhui is better than Guizhou, so i assume Yao can receive more.

Xinhau is controlled by the state and tends to convince foreigners that china is still a developing country for at least 100 years, CCP is not stupid to cast the best light which is fruitless for economic gain from international communities, CCP is good at “韬光养晦 hide her capacities and bide time ".

ty: Could you tell me how many poor countries were expanding exponentially easy after world war II?

Practically all of them in Europe. The base had been almost totally destroyed. A meaningful middle-class existence was established by the end of the fifties and early sixties. About 15 to 20 years - the same amount of time that China has had.

Political stable, CCP is doing good on this.

You are in denial. Tell us about what happened in Xiamen. Or about slave labor in many manufacturing jobs? About China's disrespect for intellectual property?

Is that enough? Shall I stop there?

China's caste system have been completely smashed by CCP's revolution

To be replaced by what? Rampant income inequality and a caste of “Nouveaux Riche” cronyism that plays hand in hand with the Chinese army and the politburo?

Keep your revolutionary fire to yourself.

When China has a democratically elected parliament and executive, do come back and we can discuss “progress” in this matter.

Land reform, everyone in rural area has his/her land.

Everyone living rurally is doing their best to send a son or daughter to work in the cities, where the jobs are. Unfortunately, there is insufficient housing and people are obliged to live in hovels - or return to the countryside.

The plots of land you talk about deliver only subsistence farming and the population would leave them immediately had they the choice. Chinese law prevents them from moving about, however.

The health care system has totally broken down in rural China and the country is a major threat world wide as regards avian flu.

I grant you that China has made great strides over the past 15 years and we acknowledge the economic progress made in bettering the lives of millions and millions of ordinary Chinese. I, for one, think this is a major success and am against both European and American carping about China "destroying our jobs". China is creating jobs for its people and as a sovereign country has every right to do so.

But, China is no where near fairness in terms of the distribution of wealth generated by its economy. And as regards democracy, as I said, come back to the forum in another decade when some progress may have been made in the matter.

You have not understood the central point of this debate: Economic progress must go hand in hand with political progress, that is, towards a stable democracy in which political leaders are elected by means of fair and open popular elections. Those conditions do not exist today.

Do you think the world is blind to what is happening in China? It is not.

T Yang, I agree with Lafayette again. Output growth is a narrow or incomplete measure of living standards. For example, unbridled growth is suboptimal, because of economic strain in the boom phase and economic slack in the bust phase. So, resources are utilized inefficiently, in both the boom and bust phases. Another example, is facilitating exports and restricting imports, which can lead to small gains from trade. China's economic policies show massive improvements in some areas and massive degenerations in others. However, the net benefit seems too low, particularly given the huge efforts. Below is a link to a short film of a slum in China, which looks worse than any slum in the U.S. a hundred years ago. Also, I've shown photos of factory conditions in China before, which also looked like a slum.

Lafayette, democracy is a joking for developing country, who is doing better than CCP over past 15 years? you are brainwashed by western propaganda about "xiamen, slave labor,Intellectual property...", that is utopianism not real life if everything were perfect for a country with 1.3 b poor people, no political system is perfect! China's political progress must go hand with Chinese civilization and economic progress, blindly follow western democracy will only make the country chaos.

AE, "China is facilitating exports and restricting imports, which can lead to small gains from trade" you are joking, it is non-relevant to restricting, Chinese want to buy imports, but we are poor and can not afford to enjoy your expensive goods, in fact, China is more open economy than USA, the trade / GDP ratio is 4 times more than USA at 70%.

AE, "Output growth is a narrow or incomplete measure of living standards. For example, unbridled growth is suboptimal", China lags behind western countries economically at least 100 years, to narrow gap, growth is bible for current China, no matter measures are optimal or suboptimal, put them all without discriminatingly to swim in market who will be optimized automatically.

Mike: "Maybe one day China will be free and stable and prosperous, just like Iraq!" Or maybe after Nazi and Soviet Europe, WWII Japan, South Korea, Vietnam, Bosnia & Kosovo, Somalia, Afghanistan, etc. The first Iraq War was limited under the U.N. mandate and U.S. Senate. Do you expect the U.S. to make the whole world "free and stable and prosperous" through wars and economics? Can you imagine if the U.S. and E.U. worked together instead of opposed each other. However, unfortunately, when the Europeans, with the exception of the British, are armed, they tend to kill each other.

At least Iraq was stable, although not free and prosperous under Saddam. However, Saddam made the mistake of attempting and failing to kill the elder Bush (second box in link below). Consequently, Bush Jr sure killed Saddam's sons, and Saddam was executed. The U.S. can either stay the course or pullback. It seems, staying the course would result in fewer civilian deaths. A pullback may create a full-fledged civil war. It's really up to the major Iraqi leaders.

It seems, even the N.Y. Times agrees with me, although it contradicts itself, stating today: The Times conceded that, as violent as Iraq is, the situation there might turn even deadlier after a withdrawal of U.S. forces. "Americans must be clear that Iraq, and the region around it, could be even bloodier and more chaotic after Americans leave." Still the Times, wrote, "Americans must be equally honest about the fact that keeping troops in Iraq will only make things worse.

Lafayette: "Europe learned its lesson..." Yes, it did, although it took several massive destructions of Europe. Last time I looked, the Middle East was in the European hemisphere. Yet, Americans always have to go over there to clean up the messes. In the U.S., there may be more guns than people (link below), and yet most Americans refrain from shooting each other (of course, except for a few, e.g. the Vice President).

This is really great information here.I would say to believe the above statistics about poverty in China is to believe in the tooth fairy. Just visit China and you will quickly realize the stats discussed above have nothing to do with the nation in question. Poverty is real and widespread.

This is great to hear, we were talking about the reasons why Africa was impoverished during imperialism and why they are still in this state today. Can anyone suggest any further reading into the current economic development of Africa compared to Asia?More importantly, this planet is not as bad as is always made out, the narrative of fear and negative sensationalism is such a huge factor in the Western consciousness.

Also, I may add, with the exception of U.S. Middle Eastern allies, e.g. Saudi Arabia and Kuwait, the region needs economic development badly. Also, more freedom, e.g. in Iran, wouldn't hurt i m [url=http://www.travestibestmodel.com]travesti[/url]

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But, for the moment, it remains very much in its initial stages. More over, the higher the standard of living the more people aspire to freedom and democracy - the ability to chose their own destiny rather than accept that imposed.

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